Sales and Use Tax Annotations

Annotation 435.0138

(a) ASSEMBLY, DISASSEMBLY AND REASSEMBLY

435.0138 Platinum. Platinum is purchased and fabricated into a liner by an out-of-state company and shipped to another company's California plant. The liner is used in the emerald growth reactors but does not become a part of the end product. The instate company maintains a platinum pool account with the out-of-state company and California tax is paid on purchases of platinum and also on the fabrication charges but not on the "reclaiming charge" made by the out-of-state company.

The "net exchange" principle is applicable to the platinum. That is, tax is due on the fabrication charge and not on the value of the returned platinum. However, tax is also properly applicable to the "reclaiming charge." (See also Annotation 330.2627.) 10/20/70.